U.S. CAPITAL MARKETS DECK SIFMA RESEARCH OCTOBER 215
Introduction America has the largest and deepest capital markets in the world according to the Federal Reserve, the capital markets provide approximately 75% of debt financing for businesses in the U.S. The securities industry facilitates access to those markets, creating investor opportunity, capital formation, job creation and economic growth. In 214, market capitalization the total value of all publicly traded securities of the U.S. stock market was $27 trillion. 3 companies conducted initial public offerings in 214 in the U.S. raising over $94 billion in new capital new values for the companies, their employees and their investors. The $7.7 trillion corporate bond market is the largest in the world: approximately 1,2 U.S. companies issued $1.5 trillion in corporate bonds to fund their operations and growth in 214. Municipal issuers raised over $338 billion in 214 to finance important community infrastructure projects including schools, airports, roads and bridges. 2
U.S. Economy GDP U.S. GDP was $17.3 trillion as of end-214, up 36.3% from $13.1 trillion in 25. GDP 25 and 214 GDP By Category 25 and 214 2 18 16 $ Trillions 1% 8% 19.1% 18.2% Government Consumption & Investment 14 12 1 8 6 4 2 25 214 6% 4% 2% % -2% 67% 68% 19.3% 16.5% -5.6% -3.1% 25 214 Net Exports of Goods and Services (Exports - Imports) Personal Consumption Expenditures Gross Private Domestic Investment (Corporate) Source: Bureau of Economic Analysis Source: Bureau of Economic Analysis 3
U.S. Economy GDP Detail 14 $ Trillions GDP By Category - Personal Consumption 25 and 214 3.5 $ Trillions GDP By Category - Gross Private Domestic Investment (Corporate) 12 1 Durable Goods 3 2.5 Nonresidential Fixed Investment 8 6 Nondurable Goods 2 1.5 Residential Fixed Investment 4 2 Services 1.5 Change in Private Inventories 25 214 Source: Bureau of Economic Analysis 25 214 Source: Bureau of Economic Analysis 4
U.S. Economy GDP in Perspective In 25, U.S. GDP was nearly three times as large as Japan s GDP, nearly six times as large as China s GDP, and 91.5% of the EU28 GDP. As of 214, U.S. GDP grew to nearly four times that of Japan, nearly twice as large as China s GDP and 94.% of EU28 GDP. 2 18 16 Gross Domestic Product of Selected Regions 25-214 $ Trillions Japan US 6 5 Gross Domestic Product Per Capita of Selected Regions 25-214 $ Thousands Japan US 14 12 1 European Union China 4 3 European Union China 8 6 2 4 2 1 25 214 Sources: World Bank 25 214 Sources: World Bank Note: European Union includes the 28 EU-member states; China excludes Hong Kong 5
U.S. Economy - Employment U.S. nonfarm employment stood at 145 million as of end-214, up 3.9% from 139 million in 25. U.S. Employment, 214 Total: 145.2 million U.S. Employment 25-214 Transportation and warehousing 3% Other 28% Government 17% Finance and insurance 4% Trade 15% Health care and social assistance 13% Source: Bureau of Economic Analysis Administrative and waste management services 6% Agriculture, Mining, Utilities, Construction 6% Manufacturing 8% 16 14 12 1 8 6 4 2 Millions Government Farm Nonfarm ex. Government 25 26 27 28 29 21 211 212 213 214 6
U.S. Corporate Financing in Perspective U.S. companies rely on the capital markets for a greater portion of total funding than do companies in the Euro Area, Japan or China, which rely more on bank funding. 1% Financing of non-financial corporations 214 9% 8% 7% 6% 5% Other Financing Other Equity Quoted Shares Bonds Loans 4% 3% 2% 1% % U.S. Euro Area Japan China (212) Sources: OECD, ECB, Bank of Japan, National Bureau of Statistics of China Note: Euro Area includes the 19 EU-member states that have adopted the Euro currency 7
U.S. Corporate Debt Financing in Perspective U.S. companies rely more on the debt capital markets for credit financing than do those in the European Union or Japan, which rely more on bank loans for funding. 1% 9% 8% 24% Financing of non-financial corporations' debt 214 25% 7% 6% 5% 79% Debt Securities Outstanding Stock of Bank Lending 4% 3% 2% 76% 75% 1% % 21% EU US Japan Sources: Bank of Japan, ECB, Federal Reserve Note: EU includes the 28 EU-member states 8
Equity Markets as % of GDP The U.S. has a larger equity market relative to the size of GDP (152%), followed by Japan (17%), the Euro Area (62%) and China (58%). 16% Size of Listed Equity Market as % of GDP 214 14% 12% 1% 8% 6% 4% 2% % U.S. Euro Area Japan China Sources: OECD, Bank of Japan, ECB, World Bank, World Federation of Exchanges Note: Includes only non-financial corporate equities; Euro Area includes the 19 EU-member states that have adopted the Euro currency; China excludes Hong Kong 9
Bond & Equity Markets as % of GDP The U.S. has the largest bond and equity market relative to the size of GDP (358%), followed by Japan (336%), the Euro Area (18%) and China (1%). 4% Size of Listed Bond & Equity Market as % of GDP 214 35% 3% 25% 2% 15% 1% 5% % U.S. Euro Area Japan China Sources: BIS, World Bank, World Federation of Exchanges Note: Includes only non-financial corporate equities; Euro Area includes the 19 EU-member states that have adopted the Euro currency; China excludes Hong Kong 1
U.S. Capital Markets U.S. Capital Markets Issuance - Equity vs Bonds, 214 Total: $6.2 trillion U.S. Capital Markets Outstanding - Equity vs Bonds, 214 Total: $66.9 trillion Equity Market 5% Equity Market 42% Bond Market 58% Bond Market 95% Source: Bloomberg, Dealogic, Thomson Reuters, US Agencies, US Treasury, SIFMA Source: NYSE, NASDAQ, Federal Reserve, Bloomberg, U.S. Agencies, U.S. Treasury, SIFMA Note: Issuance includes long-term corporate, agency and non-agency MBS and CMOs, agency debentures, Treasury, and municipal securities, and primary and secondary equity issuance. Outstanding includes both short- and long-term debt securities and equity market capitalization. 11
U.S. Bond Markets: Issuance Between 25 and 214 Treasury issuance increased from 13.5% to 37.7% of total U.S. bond issuance Corporate issuances increased from 13.6% to 24.4% Mortgage-related issuances decreased from 48.7% to 22.9%. U.S Long-Term Bond Issuance 25-214 8 7 6 5 4 3 2 1 $ Trillions Corporate Asset-Backed Non-Agency MBS Agency MBS Federal Agency Muni/State Treasury 25 26 27 28 29 21 211 212 213 214, Bloomberg, Dealogic, US Treasury, US Agencies, SIFMA 12
U.S. Bond Markets: Outstanding The total value of outstanding bonds in the U.S. was $39. trillion at the end of 214, 47.6% larger than at end-25. While all sectors increased in dollar volume outstanding between 25 and 214, Treasuries and corporates increased relatively more than the other products. Treasuries rose from 16% to 32% and corporates rose from 17% to 2%, respectively, between 25 and 214. 4 35 3 25 2 15 1 5 $ Trillions U.S. Bond Market: Outstanding 25-214 Treasury Muni/State Federal Agency Agency MBS Non-Agency MBS Asset-Backed Corporate 25 26 27 28 29 21 211 212 213 214 Source: Bloomberg, Thomson Reuters, US Treasury, US Agencies, Federal Reserve, SIFMA 13
Treasury Bond Markets: A Closer Look The U.S. Treasury issues different maturities of debt: Short Term or Bills (up to one year) and Long-Term or Notes (one year to 1 years) and Bonds (over 1 years). In 214, the U.S. Treasury issued $2.2 trillion in new securities, almost three times the $746.1 billion issued in 25. The U.S. Treasury bond market outstanding was $12.5 trillion as of end-214, up three-fold from end-25. U.S. Treasury Bond Issuance By Tenor, 214 Total: $7. trillion Bonds 3% 2,5 2, U.S. Long-Term Treasury Bond Issuance 25-214 $ Billions Notes 29% Bills 68% 1,5 1, 5 Source: U.S. Treasury 25 26 27 28 29 21 211 212 213 214 Source: U.S. Treasury 14
Municipal Bond Markets: A Closer Look Municipal bonds are issued by state and local governments, agencies and authorities. There are over 55, different municipal bond issuers. In 214, $337.5 billion in municipal securities were issued, 17% below the $47.2 billion in 25. The municipal bond market outstanding was $3.7 trillion as of end-214, up 21% from end-25. Municipal Issuance By Type, 214 Total: $337.5 billion Municipal Issuance 25-214 5 $ Billions Development 3% Housing 3% Other 14% Education 24% 45 4 35 GO Revenue Healthcare 6% 3 25 Utilities 11% Transportation 15% General Purpose 24% 2 15 1 5 25 26 27 28 29 21 211 212 213 214 15
Corporate Bond Markets: A Closer Look Corporate bonds can be divided into investment grade (IG) and high yield (HY) based on their credit rating. IG bonds have ratings of BBB to AAA, while HY bonds have credit rating below BB. Bonds that have not been rated are also counted as HY. In 214 $1.4 trillion of corporate bonds were issued, almost double the $75. billion in 25. The size of the corporate bond market was $7.8 trillion at end-214, up 7.7% from 25. Corporate Bond Market Issuance, 214 Total: $1.4 trillion 1,6 $ Billions Corporate Bonds Issuance 25-214 Materials 4% Media and Entertainment 5% High Technology 5% Industrials 6% Other 13% Financials 43% 1,4 1,2 1, 8 6 4 High Yield Investment Grade Healthcare 8% Energy and Power 16% 2 25 26 27 28 29 21 211 212 213 214 16
Mortgage-Related Markets: A Closer Look The mortgage-related securities market is comprised of: Agency mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs) Non-agency commercial residential mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS). In 214, mortgage-related securities issuance totaled $1.3 trillion, half of the $2.7 trillion in 25. The mortgage-related market had $8.7 trillion outstanding at end 214, up from $7.2 trillion in 25. Mortgage-Related Issuance By Type, 214 Total: $1.3 trillion Non-Agency RMBS 4% Non-Agency CMBS 7% 3, 2,5 2, $ Billion s Mortgage-Related Issuance 25-214 Non-Agency Agency 1,5 Agency CMO 16% 1, Agency MBS 73% 5 25 26 27 28 29 21 211 212 213 214 Sources: Bloomberg, Dealogic, Thomson Reuters, US Agencies, SIFMA Source: Bloomberg, Thomson Reuters, Dealogic, Fannie Mae, Freddie Mac, Ginnie Mae, SIFMA 17
Asset-Backed Markets: A Closer Look Asset-backed securities are backed by cash flows of non-mortgage collateral such as auto loans, credit card balances or student loans. In 214, $225.4 billion of asset-backed securities were issued in 214, down 22% from 25. The asset-backed market had $1.3 trillion outstanding as of the end of 214, up 4.8% from 25. Asset-Backed Issuance By Type, 214 Total: $225.4 billion Asset-Backed Issuance 25-214 Student Loans 6% 35 3 $ Billions Housing- Related 1% Other 1% Auto 43% 25 2 15 Equipment 8% 1 5 Credit Cards 23% 25 26 27 28 29 21 211 212 213 214 18
Agency Bond Markets: A Closer Look Agency bonds are debt securities issued by U.S. federal agencies or government-sponsored enterprises (GSEs). The largest three agency issuers are Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Banks (FHLBs). In 214, $377.4 billion in agency securities were issued, down 41% from the $635. billion in 25. The agency bond market had $2. trillion outstanding at end 214, down from $2.6 trillion in 25. Long-Term Agency Bond Issuance by Agency, 214 Total: $377.4 billion 1,4 Long-Term Agency Bond Issuance 25-214 $ Billions Freddie Mac 2% Fannie Mae 1% Federal Farm Credit 18% 1,2 1, 8 6 Federal Home Loan Banks 52% 4 2 25 26 27 28 29 21 211 212 213 214 19
Equity Market: A Closer Look Most of the equity issued in the U.S. is in the form of common stock, which represents ownership in a corporation, with the balance issued in preferred stock, which combines features of debt and equity. Common shares can be divided further into Initial Public Offerings (IPOs) - the first sale of stock to the public and secondary offerings every subsequent stock issuance by that. In 214, stock offerings raised $311.4 billion, up 69.2% from $184. billion in 25. As of end-214, U.S. equity market capitalization stood at $27.9 trillion, 45.2% higher than in 25. U.S. Equity Market Issuance, 214 Total: $311.4 billion Preferred Stock 12% 35 3 25 $ Billions U.S. Equity Market Issuance 25-214 Preferred Stock Initial Public Offerings 2 Secondary Offerings 56% Initial Public Offerings 32% 15 1 5 25 26 27 28 29 21 211 212 213 214 2
Equity Market: A Closer Look at IPOs IPOs can be divided into true IPOs which are offered by companies going public and those offered by closed-end mutual funds. In 214, $94.3 billion was raised in true IPOs, up 144.1% from $38.6 billion in 25 and $6.5 billion in closed-end IPOs, 71.3% down from $22.7 in 25. Materials 4% Real Estate 4% Retail 5% "True" IPO Issuance, 214 Total: $94.3 billion Healthcare 1% Energy and Power 14% Other 7% Financials 19% High Technology 37% 11 1 9 8 7 6 5 4 3 2 1 $ Billions Equity Issuance 25-214 Closed-end funds IPOs "True" IPOs 25 26 27 28 29 21 211 212 213 214 21